Indonesian Stocks Climb First Time in Five Days as Pension Buys

A statue of a bull stands in front of an electronic board displaying the closing figure of the Jakarta Composite Index (IDX Composite) at the Indonesia Stock Exchange in Jakarta on Aug. 19, 2013. Photographer: Dimas Ardian/Bloomberg

Aug. 21 (Bloomberg) -- Indonesian stocks rose for the first
time in five days after valuations sank to a 14-month low and
the nation’s biggest pension fund said it’s buying. The rupiah
slid to the weakest level in four years and bonds fell.

The Jakarta Composite Index added 1 percent to close at
4,218.45. The gauge traded yesterday at 12.26 times projected
12-month profit, the lowest level since June 2012, data compiled
by Bloomberg show. The rupiah dropped beyond 10,800 per dollar
today for the first time since April 2009, prices from local
banks show. The yield on 10-year government bonds rose to the
highest level since March 2011.

PT Jamsostek, which oversees about $13 billion, is
increasing purchases of the largest Indonesian stocks, President
Director Elvyn Masassya said yesterday. The Jakarta index has
tumbled at the fastest pace worldwide this quarter amid concern
the rupiah’s retreat will fuel the quickest inflation in four
years and lead to tighter monetary policy. Speculation that the
U.S. Federal Reserve will soon reduce stimulus, making it harder
for Indonesia to fund its record current-account deficit, has
contributed to the declines.

“Indonesian asset prices are cheap for those who can
withstand this bad economic weather,” Alvin Pattisahusiwa,
director of investment at PT Manulife Aset Manajemen Indonesia,
the country’s second biggest mutual fund manager with 12.8
trillion rupiah ($1.2 billion) worth of assets under management.
“If they are willing to invest and keep it for at least one
year, then this is the time.”

Trading volumes in Jakarta index companies were 64 percent
higher than the 30-day average today, according to data compiled
by Bloomberg. The gauge had fallen 11 percent during the past
four days and was down 12 percent this quarter.

State-owned Jamsostek is buying major companies and will
increase its holdings of shares to between 22 percent and 25
percent of assets under management, Masassya said in a mobile-phone text message late yesterday. Around 19 percent of the
investment vehicle’s holdings were in stocks, he said June 19.

Technical Rebound

The Jakarta gauge pared losses toward the end of the day
yesterday, closing 3.2 percent lower after falling as much as
5.8 percent. Its 14-day relative strength index declined to
26.6, below the 30 threshold that some investors see as an
indication a rally rebound is imminent.

“This is just a brief technical rebound,” Akbar Syarief,
a money manager at MNC Asset Management, which oversees about
$485 million, said by phone from Jakarta. “I still think the
downside remains as there is no change to our fundamentals.”

Foreigners sold $182 million of the nation’s shares
yesterday, the most in two months. Inflation reached 8.6 percent
in July, the fastest pace since February 2009. The current-account deficit swelled to $9.8 billion in the second quarter,
the most in data compiled by Bloomberg going back to 1989, the
central bank reported on Aug. 16.

The rupiah dropped 0.8 percent to 10,775 per dollar, the
weakest since level since April 2009, according to prices from
local banks. It traded at a 4.2 percent premium to the one-month
non-deliverable forwards, which fell 1.4 percent to 11,228 per
dollar, data compiled by Bloomberg show.

Policy Package

The yield on the nation’s bonds due May 2023 climbed one
basis point, or 0.01 percentage point, to 8.51 percent, after
reaching 8.54 percent earlier, the highest level since March
2011, prices from the Inter Dealer Market Association show.

President Susilo Bambang Yudhoyono said the government will
announce a policy package on Aug. 23 to address economic
problems. Manulife’s Pattisahusiwa said the government needs to
target the trade balance, income repatriation and to coordinate
more closely with Bank Indonesia.

“The biggest risk for investors is macroeconomic
uncertainties,” Pattisahusiwa said. “The market could react
positively after that announcement. It is more about boosting
market confidence.”